Raising Funding Against the Future Flow of Diversified Payment Rights: Lessons for Russia

1. Raising Funding Against theFuture Flow of Diversified Payment Rights: Lessons for Russia Alex von SponeckHead of Central and Eastern Europe, Middle East and AfricaDebt Capital Markets OriginationMerrill Lynch InternationalTel: +44 207 996 3804Email: Alex_vonsponeck@ml.comOctober 2006

2. Contents Diversified Payment Rights Securitisation • Introduction 1 • General Market Overview 2 • DPR Securitisation Structure 6 • Alfa-Bank Transaction Summary 9

3. Introduction

4. Introduction • Diversified Payment Rights (“DPR”) future flow securitisations have been an important source of funding for emerging market banks in a wide range of jurisdictions: Brazil, Peru, El Salvador, Russia, Kazakhstan, Turkey and Mexico • Alfa-Bank’s debut US$350 million DPR-backed offering was Russia’s first DPR securitisation – a number of other Russian banks are now preparing similar issuances • This presentation sets out: • A general overview of Future Flow Securitisations • A basic transaction structure for DPR future flow securitisations • A case study of the Alfa-Bank deal including the major issues Alfa-Bank faced in executing their deal • The advantages to an issuer of a DPR future flow securitisation programme, and lessons learned 1

5. General Market Overview

6. General Market Overview Emerging Market Future Flow Securitisations – Market Overview Future Flow Securitisation Future Flow Issuance • Future flow securitisation became popular in emerging markets in the early 1990s as a mechanism to reduce sovereign related risk and provide more attractive access to international capital markets • This funding instrument has grown in emerging markets over the past 15 years, primarily in response to search for lower cost of funds by companies that generate hard currency cash flows outside their country of domicile • Future flow securitisations investments have consistently proven themselves to investors, and over the years they have successfully mitigated a variety of the risks associated with emerging market investments • Mexico and Turkey had been the dominating country for future flow issuance until 2001. Currently, there has been a significant amount of issuance out of other countries and Eastern Europe and Russia have shown significant potential for strong future flow candidates: • Gazprom International S.A. (July 2004, US$1.25bn) (Merrill Lynch) • Russia International Card Finance S.A. (Rosbank, November 2004, US$225m) (Merrill Lynch) • Russia International Card Finance S.A. (Tap issue, February 2005, US$70m) (Merrill Lynch) • Alfa DPR Finance Co (March 2006, US$350m) (Merrill Lynch) 1991-2006 to date (US$m) By Country / Region 2

7. Other Airline Receivables Remittances/Diversified Payment Rights Credit Card Receivables General Market Overview Emerging Market Future Flow Securitisations – Market Overview Types of Assets Securitised Market Share – Types of Assets • The types of assets securitised by these future flow securitisations have varied over the years • The most common flow being securitised by corporates have been export receivables (e.g. Gazprom, Egypt General Petroleum Corp., Pemex, Indo Coal transactions) • Financial remittances (Swift receivables or DPRs) have become the most popular future flow asset class for banks, with US$13.4 billion of remittances/diversified payment rights (DPR) securitisations since 2002 • DPR securitisations are closely followed by credit card receivables, which have totalled US$5.1 billion since 1998 • DPRs are created as a result of the role of the emerging market financial institution as financial intermediary between foreign payers wishing to send funds to a company or individual in that emerging market: • It leverages existing export client relationships • The funds are typically sent from countries rated investment grade • Funds are denominated in hard currencies • Use existing global standardised systems for transferring funds (Swift) • Funds are captured offshore to mitigate sovereign intervention, inconvertibility and transferability events • The following overview will focus solely on DPR securitisations, which is a subset of the emerging market future flow securitisation universe 1991-2001 (US$m) 2002-2006 YTD (US$m) Export Receivables 3

8. General Market Overview What are Diversified Payment Rights? • The DPRs sold in a DPR securitisation are sourced by a bank, such as Alfa-Bank, acting as an intermediary, either for Russian exporters or individuals, or for other parties in Russia which receive FX cash flows from abroad • DPRs are made up of the following forms of payment orders generated through the SWIFT payment system: • Customer payments (MT100 series) • Bank to bank transfers (MT200 series) • Collections and cash letters, including “cash against documents” export transactions (MT400 series) • Documentary credits and guarantees, including “letter of credit” export transactions (MT700 series) • Travellers’ cheques (MT800 series) Offshore Russia Remitting Entities (Individuals, Corporates) Remitters’ Bank (Outside Russia) Local Beneficiaries Payment Instruction IrrevocablePayment Obligation On Payment Generally only Swift MT100 and MT200 payment orders are included in a DPR transaction 4

9. General Market Overview DPR Securitisation – Market Overview DPR Issuance – the Players DPR Issuance • Turkish banks have been the largest users of DPR securitisation with more than US$9.8 billion in total issuance, followed by Brazil with US$4.1 billion • Most financial transactions included as collateral have been commercial in nature (trade/export related or foreign direct investment) • Exceptions are the Brazilian, Salvadorian and Turkish DPR securitisations, which have a high percentage of worker remittances • In March 2006, Alfa-Bank closed the first ever DPR securitisation to date in Russia – rated 2 notches higher than the unsecured debt rating (Baa3 vs. Ba2) • The first capital markets funded DPR securitisation in Kazakhstan was closed in 2005 by Kazkommertsbank 1995-2006YTD (US$m) DPR Transactions to DateRussia / Kazakhstan 5

10. DPR Securitisation Structure

11. Bank A Bank B Bank C Bank D DPR Securitisation Structure Processing and Financing of DPRs Payment Flow Process Offshore Russia Alfa-Bank’s Correspondent Banks Sender Sender’s Bank Alfa-Bank Beneficiary Sender • A Sender directs a payment order to a Beneficiary in Russia • The Sender of the payment order directs its bank of choice (the “Sender’s Bank”) to remit a payment to an account of the Beneficiary, who holds an account with Alfa-Bank • Alfa-Bank holds USD and EUR nostro accounts with several international Correspondent Banks • The Sender’s Bank issues a Payment Order to Alfa-Bank in Russia for credit of the Beneficiary • If the Sender’s Bank is not one of Alfa-Bank's Correspondent Banks then it will forward this Payment Order to a Correspondent Bank of Alfa-Bank. This Bank will then issue the Payment Order to Alfa-Bank via SWIFT 6

12. DPR Securitisation Structure Transaction Structure Transaction Summary Initial Flow of Funds • Alfa-Bank pledges the DPRs via a secured loan agreement to an SPV in a tax neutral jurisdiction • The SPV funds the loan secured by the DPRs via a note issuance in the international capital markets • Exporters trade as normal with importers who make SWIFT payments to the designated correspondent banks (the “Correspondent Banks”) of Alfa-Bank • Alfa-Bank instructs approximately five to eight Correspondent Banks to redirect USD and EUR payment flows to the SPV • The SPV traps sufficient cash to meet the next debt service under the Notes Offshore Russia 2 Note proceeds SPV Collection Account Alfa-Bank 3 Pledge of DPRs 1 Notes Note proceeds Note Investors • The SPV sells Notes to investors for a consideration of US$x million • The SPV pays US$x million to Alfa-Bank as a loan secured by existing and future DPR flows pledged or sold under the Factoring Agreement • Alfa-Bank pledges to the SPV all its rights, title and interest in and to all DPR payment rights 7

13. DPR Securitisation Structure Processing and Financing of DPRs Ongoing Flow of Funds Offshore Russia Sender Sender’s Bank Correspondent Banks Alfa-Bank Instructions to remitpayments to SPV 5 Payments Sender USD/EUR payments Beneficiaries 2 USD/EUR payments 1 SPV Collateral Account Excess funds 4 3 Debt service Note Investors • Senders instruct their foreign Correspondent Banks to remit payments to beneficiaries in Russia, either directly or via the Sender’s Bank • Alfa-Bank’s Correspondent Banks send Payment Orders to Alfa-Bank via SWIFT and deposit the funds into Alfa-Bank’s nostro accounts at these Banks. Funds are periodically transferred to a Collateral Account of the SPV • Funds from the Collateral Account are used by the SPV to meet debt service payments under the Notes (interest and principal) • Once the SPV has sufficient funds in the Collateral Account to cover the debt service for the next payment period, the excess funds are transferred to Alfa-Bank • Alfa-Bank continues to service the Payment Orders to its clients in Russia 8

14. Alfa-Bank Transaction Summary

15. Issuer: Alfa Diversified Payment Rights Finance Company S.A. Originator: Open Joint-Stock Company “Alfa-Bank” Series 2006-A Notes issued under Alfa-Bank’s newly established multi-issuance DPR Programme Transaction Type: Senior secured, ranking pari passu with all other issues off the programme in the future Credit Priority: Format: Reg S/144A (Alfa’s first ever 144A issuance) Structure Rating: Baa3 (Moody’s) (two notches above Alfa’s Ba2 unsecured rating Nominal Amount: US$350,000,000 Amortisation Schedule: 20 equal payments Pricing Date: 27 March 2006 Final Maturity Date: 15 March 2011 Average Life: 2.5 years Coupon: 3m US$ Libor + 160 bps (quarterly) Issue/Re-offer Price: 100.000% Re-offer Spread: 3m US$ Libor + 160 bps per annum Alfa-Bank Transaction Summary Alfa-Bank US$350m Series 2006-A Issuance Backed by DPRs Summary Terms and Conditions 9

16. Alfa-Bank Transaction Summary Alfa-Bank US$350m Series 2006-A Issuance Backed by DPRs Highlights Geographic Distribution • The issue attracted a high quality order book with broad geographic distribution and strong participation from many premier Emerging Market asset managers and insurance companies, a very significant number of accounts • The 57% participation of US investors is one of the highest ever penetrations of the US investor base for a Russian transaction under 144A, this is all the more notable as the deal was Alfa-Bank's debut deal under 144A Highlights Geographic Distribution 10

17. Designated Depositary Bank Ratings 2005 DPR Flows (in US$) JP Morgan Chase Bank, New York Aa3 / A+ / A+ (pos) 9,750,625,436 69.14% Aa3 / AA- / AA- 1,718,057,446 12.18% Deutsche Bank Trust Co. Americas, New York 643,582,162 4.56% HSBC Bank USA, New York Aa2 (pos)/ A+ (pos) / AA- Bank of New York, New York Aa3 / A+ / AA- 574,021,537 4.07% Total – Designated Banks 12,686,286,581 89.96% Others 1,416,516,850 10.04% Collections 14,102,803,431 100.0% Alfa-Bank Transaction Summary Designated Depositary Banks (“DDBs”) • DPRs are paid by the sender’s banks into accounts at Alfa-Bank’s Depositary Banks outside of Russia • Depositary Banks that have signed Account Agreements are known as Designated Depositary Banks (“DDBs”) • Payments into accounts held at DDBs are controlled by the Trustee (JP Morgan Chase Bank in this transaction) • Alfa-Bank has signed Account Agreements with four of its top US$ Depositary Banks • 89.96% of the DPRs received by Alfa-Bank in 2005 flowed through the four DDBs: 11

18. Alfa-Bank Transaction Summary Structural Features Protecting Investors Comprehensive Mitigation of Risk – Early Amortisation Events 12

19. Alfa-Bank Transaction Summary Triggers Provide Further Security for Investors Test Early Amortisation of the Notes will be triggered in the event of the following 13

20. Alfa-Bank Transaction Summary Further Tests and Covenants Other Structural Features 14

21. Alfa-Bank Transaction Summary Actual Debt Service Coverage Ratios • These numbers are calculated using Alfa-Bank’s 2005 DPR flows and assuming a US$350m note issuance Monthly Debt Service Coverage Ratio Quarterly Debt Service Coverage Ratio 15

22. Transaction Documents “Programme Structure” Provides Flexibility and Cost-Savings Future Flow Securitisation Transaction Documents • Allows the issuer to sell multiple series of debt certificates from the same assets. All series share the credit risks and cash flows from a single large pool of Receivables • Offers potential for an ongoing programme of financing, as funding needs dictate, and access to a variety of investors, maturities and currencies on both a strategic and opportunistic basis • Allows more flexibility for the issuer to tailor the credit and repayment profile of the issued securities • Despite slightly higher initial costs, offers the ability to transact more cost effective future flow securitisations on an ongoing basis • Different series can have different tenors and amortisation schedules • Notes can be issued in multiple currencies (e.g., U.S. Dollars, Yen, Euros, etc.) • Notes can bear either a fixed or floating interest rate • Notes can be “enhanced” (e.g., supported by a financial guarantee) or “unwrapped” (e.g., not supported by a financial guarantee) • Notes can be offered to investors in several ways (e.g., registered with the SEC, 144A or “pure” private placement) The primary documents used in a secured loan structure are: • Secured Loan Agreement • Secured Loan Supplement(s) • Pledge Agreement • Indenture • Indenture Supplement(s) • Account Agreements 16

23. Why Use Future Flow Securitisation?

24. Why Use Future Flow Securitisation? Advantages • Lower cost of funding • Execution stability in more difficult markets • Higher rated than senior unsecured debt • Alternative/diversification of funding sources • Ability to attract monoline guarantors, subject to ratings Lessons Learned • Distribution strength is key – choose the Arranger well • Ability to negotiate & structure with Rating Agencies is crucial • Investors are willing to understand and accept new structures from Russia • True sale vs. pledge of assets – tax implications 17

25. November 2004/January 2005 July 2004 US$300m US$1,250m Rosbank Gazprom Russia’s first ever Bank securitisation Russia’s first Structured Export Notes transaction Due September 2009 Due February 2020 March 2006 October 2006 US$350m [US$430m] in execution Alfa Bank MDM Auto Loan Russia’s first DPR securitisation Russia’s first 144A Auto Loan Securitisation Due March 2011 Due March 2012 Merrill Lynch – The Leader in Russia & CIS Securitisation 18

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